What is Life insurance?
There's a lot of information out there about life insurance, but you don't need to understand all of it to get started.
The basic premise is simple:
Life insurance gives you peace of mind while you're alive, and financial support for your loved ones when you're gone.
- It's something you should have if there are people in your life depending on you for everyday living expenses, rent or mortgage repayments, education tuition costs, or retirement income.
- It's something you should have if there are people in your life you love and care for and want to support financially or emotionally; like gifting a deposit for a first home, paying out student debts, helping with a medical procedure or supporting an additional needs friend or even a charity whose beliefs match your own.
- It's something you should have if you have borrowed money from others, if you have joint debts on joint assets (like a home) or if you need to equalise the value of your estate comprised of 'lumpy assets' between multiple beneficiaries (estate planning and inheritance) or if you want to leave a financial legacy, inheritance or provisions for someone you love.
When someone is dependent upon another person being alive or in good health, it makes sense to insure against that person dying or being incapacitated.
Learning to Protect and Provide – its the most noble of human traits
Protecting and providing is one of humanities most desirable traits
The idea behind Life insurance is, during your life you will probably support people you love, you will choose your family and friends and maybe support a cause, or a charity or two as well. Don’t let all this good not happen, just in case you’re not here to do it.
- Life insurance can make a huge difference for you and your family, not just financially but emotionally, too. And purchasing a policy sooner, rather than later, will give you more options and flexibility, and improve your future financial security.
- What many people don't know is Life insurance also pays out upon a Terminal Illness diagnosis, making it relevant for you today, and later.
The good news about Life insurance is if you need it, you probably have something of value to protect – a family, a loved one, and the ability to continue to earn an income.
So you could say that Life insurance is the price we all pay for our prosperity.
What Life insurance does
Life insurance gives your nominated beneficiary a lump sum payment when you pass away or pays you if you’re diagnosed with a terminal illness.
- In general, early in life, most people have large debts and financial responsibilities, but a low level of salable assets to support them if they get sick or injured, disabled, or even unexpectedly pass away.
- Later in life, most people have lower debts and financial responsibilities, but a higher increase in health risks to protect against, if they get sick or injured, disabled, or even unexpectedly pass away.
Why Life insurance is different for everyone
- Everyone faces different types and levels of risk in life in combination with their age and type of occupation – so the right solutions are different for everyone.
- Different levels of risks grow out of our particular types of jobs, the current state of health and pastimes – like weekend hobbies and club sports, and even your family health history.
Having the right amount of insurance in place is not a goal in itself
It's about supporting our very human trait to protect and provide. It's what makes us human and makes life love and business worth pursuing.
- It's not about owning a financial product, rather it's the way a person's goals can be achieved and loved ones can be provided for (and business debts managed) in the event we're no longer around to care for them.
- Planning ahead just in case, is an important life skill. Financial 'preparing' (not just financial planning) is a learned life skill we all need to work on. Preparing for a future is the way we all navigate through our ever-increasing complex lives.
Having sufficient Life insurance is making sure that you and your family have a place to live, your children can complete their education and your partner can continue to live in the location where they are most supported.
And how much insurance is enough for you, really depends upon how much living you have to do.
Watch our Explainer Video: How Much Life Insurance is Enough?
Not sure Life insurance is what you need at the moment?
When you start thinking about getting your life insurances sorted, odds are you're thinking about protecting your family, (biological or logical) both now and in the future. And that's a great place to start.
But your unexpected death or terminal illness may not be the first thing on your mind.
- A serious illness or sudden disability can have enormous financial effects on you and your family.
- And it could also have a long term effect on your ability to continue to earn your income.
- It can disrupt or stop a business, and it can trigger a business partner to question the stability of a shared future venture. A serious illness or disability of a director can trigger an automatic loan call-up at the worst possible time and surprise medical bills can stress personal and business cashflow.
Modern life and business both carry the innate statistical risks of life – we call The Numbers of Life – that need to be considered and managed.
The 4 Statical risks of life we all face
The reason we say these 4 risks are faced by everyone is because they are statical realities. This means they aren't personal – they're statical – and therefore cannot be avoided just managed. And that's where Sapience Financial can help you do that.
The Numbers of Life | The Statistical Risks of Life we all face
Crisis & Trauma
We all have a 1 in 3 chance of suffering a critical medical trauma or significant illness during our working life.
Income Protection
We all have a 1 in 4 chance of being sick or injured and unable to work for at least 3 months during our working life.
Life & Terminal Illness
We all have a 1 in 10 chance of unexpectedly passing away during our working life.
Total & Permanent Disability (TPD)
We all have a 1 in 20 chance of being disabled long term with a total and permanent disability.
Source: Life Underwriting Guidelines
Frequently Asked Questions about Life & Terminal Illness insurance
How much cover do I need?
It depends on where you are in your life and who depends on you financially. To start with, work out how much life insurance you need by calculating your long-term financial obligations and then subtracting your salable assets. The remainder is one of the gaps life insurance can fill.
- When you're starting a family, you probably also want to have enough to replace your income, so your spouse or partner and children have the support they need.
- You will want to have a stable place to live – hopefully debt free soon.
- Later in life, when your kids are grown and your house is paid for, you may want to reassess the amount of life insurance you have and focus on final expenses, outstanding debt, and the legacy you would like to leave your loved ones.
- If you're a Business, a Sole trader, a Partnership or running a Company structure, you will want to have a deeper conversation about Family risks and Business risks, and how to keep them apart.
Learn more at the government's MoneySmart website life insurance calculator here.
Is Life insurance worth it?
What if my Super fund already provides life insurance?
Can my Super fund pay the insurance premiums for my Life insurance policy?
How we can help
Life and Terminal Illness insurance is the cornerstone of protecting yourself, your family and your business from those risks in life that are too traumatic and expensive to personally carry.
Contact us for a confidential chat about your needs.
Related: Types of Personal Insurance products we work with
Different types of risk protection insurances, provide protection for different life risks.
- Life & Terminal Illness - the basis of all protection strategies
- Income Protection - safeguarding your ability to continue to earn your income
- Total & Permanent Disability (TPD) - protecting against the long-term financial consequences of disability
- Crisis & Trauma Recovery - protecting against specified serious medical conditions (more a 'when' you need to claim than an 'if')
- Severity Based Insurance - designed to pay small claims sooner (Life, Crisis & TPD insurances in one)
